Captions, a video editing app backed by Kleiner Perkins, Sequoia Capital, and Andreessen Horowitz, is shifting to a freemium business model amid uncertainty surrounding ByteDance’s CapCut in the United States.

App Image Credits: Captions

The new free tier includes fundamental video editing capabilities, subtitle addition tools, and teleprompter functionality for recording and voiceovers. Advanced features, including AI avatars, AI editing, and the social studio suite, remain exclusive to paid subscribers.

CEO Gaurav Misra told TechCrunch that the strategic shift aims to capture users who might lose access to CapCut’s editing tools in case of a ban. The company positions itself as an alternative, while CapCut’s future remains unclear.

“Our app has a lot of AI-powered editing features at the moment,” Misra stated. “However, there are a lot of people who use different apps for traditional video editing without using AI-powered features, and our free tier is targeting that audience.”

In July 2024, Captions announced a $60 million Series C funding round led by Index Ventures, bringing its total capital raised to $100 million. The investment reportedly drove the company’s valuation to $500 million. At the time, Captions noted it had expanded its team from 15 to 60 employees in NYC to make professional-quality video production accessible to a broader audience.

Market Competition and Future Plans

According to data from analytics firm Sensor Tower, CapCut has accumulated over 1.3 billion downloads in the past two years, maintains approximately 51.2 million daily active users, and has generated more than $460 million through in-app purchases.

However, its parent company, Chinese ByteDance, faces a potential U.S. exodus, as an April 2024 legislation forces it to sell TikTok’s U.S. operations by January 19 or face a nationwide ban.

Misra noted that basic video editing features operate locally on devices, eliminating server costs and enabling the company to offer these features at no charge. Captions plans to expand its AI-powered features to lower-priced tiers as operational costs decrease, with its AI creator feature already included in the $10 monthly Pro plan.

The move positions Captions to compete more directly with established video editing applications, including CapCut, InShot, and Invideo.